For more than a year now, we’ve seen an ongoing shift in employee–employer dynamics. And despite an uncertain economic outlook, our research shows that employees remain less engaged in their current roles—with many seeking opportunities where they can find value in their work in the form of purpose and meaning.
This is an area in which Peter Stavros, the co-head of US private equity at KKR, excels. Heavily influenced by his father’s career journey—and his own experience in the corporate world—Pete founded and chairs Ownership Works, a nonprofit dedicated to advancing and championing the employee ownership movement in corporate America.
I recently sat down with Pete for a terrific dialogue about the value of ownership and how we can all do more to create an economy that is inherently more inclusive—and one that just works for everyone.
Pete, let’s start by talking about the two very different hats you wear. You founded a nonprofit focused on employee ownership, and you are also the co-head of private equity at a large and successful investment company. Tell us how you see these two roles.
The nonprofit work really came out of my for-profit work. I have been an investor for almost 25 years and have been working on how to leverage an “ownership culture” where people feel a different level of accountability, have increased opportunities to impact their work, and—in the end—are more engaged and less likely to quit.
At KKR, this started back when I stepped into a leadership role and took over management of the industrials vertical. It was 2010. I began experimenting with the idea of sharing stock ownership with all employees in a company, from senior executives to entry-level colleagues on the manufacturing shop floor.
In a typical manufacturing company, 80 percent of employees are working in skilled trades versus office jobs, and these roles tend to see a somewhat high rate of turnover and low levels of employee engagement. I wanted to help address this challenge in a way that was good for the workers, good for the company, and good for investors.
I understand you have a personal story here as well. Your dad was a construction worker in Chicago for 40 years. He was a big inspiration for you and helped spark your interest in employee ownership. Can you tell us more about your dad and the connection between his professional experience and how it inspired your nonprofit, Ownership Works?
My dad was an hourly worker earning, say, $15 an hour operating a road grader. There was a lot of conflict between my dad and his colleagues on one side, and the management of the construction company on the other—especially around how many hours they were paid for. Would they be paid for their time driving to and from the job sites? What about lunch? Would they be paid for their lunch hour? And it used to drive my dad crazy.
He would always say, “There’s no incentive for me to be productive or to care about quality, cost, on-time delivery, or customer satisfaction. Shouldn’t this be different?” So, really, my dad always dreamed of profit sharing and having a voice in his work, as opposed to having to fight over hours.
When I became an investor almost 25 years ago, one of the first things I worked on was an employee stock options plan (ESOP) which is not as common anymore, particularly for companies at scale. This was a tax structure that the government came up with to provide tax incentives for sharing ownership broadly. This was a moment of real excitement for me. I was able to see a lot of what I believed growing up—namely the need for both incentive alignment and greater opportunities for hourly workers to build wealth—in action in a fascinating way. From there, I continued to explore this idea of broadening ownership. I studied it intensively at business school and published a paper on it. And when I got into a leadership position, I had an opportunity to start experimenting with it in the real world.
Can we go a step further and talk about the relationship between ownership and wealth building? You have said that one of the objectives of starting this ownership movement is to create $20 billion in wealth for low- and moderate-income households and for people of color. As you look ahead, what will it take to make this a reality?
I am not worried about hitting that $20 billion goal because our portfolio alone has almost 800,000 employees, and if you look at the firms that have already joined Ownership Works, we have a very good shot at impacting millions of people.
I am more focused on how we can generate $100 billion and then $200 billion. To impact tens of millions of people, a number of things will have to happen. For one, it’s going to take a mindset change in corporate America, where people decide ownership belongs in more hands than just the top one or two layers of an organization. I think there is also going to need to be some IP development around how you administer broad programs of ownership, and how you communicate them. And lastly, broad ownership needs to become accepted enough and common enough that leaders do not feel like they are taking a huge risk by sharing ownership with all employees. Additionally, employees have to believe this is real; there is a lot of mistrust between workers and management in corporate America today.
Employee ownership can create huge value for workers and investors alike and, if combined with amplifying worker voice, information sharing, and financial education, I think it has a chance for this to really catch fire and have a big impact on all stakeholders.
Right now, there is a lot of attention on making our economy more inclusive. Seven out of ten people today live in societies where the income disparity is actually getting worse, not better. Do you think ownership is going to make our economy inherently more inclusive?
Yes, I do think inclusivity and ownership are related. If you go back to the idea that today’s ownership is focused on the top few layers of a company, those layers are not diverse. Women are underrepresented. Racially diverse colleagues are underrepresented. We need to change that, of course. But in terms of what we can do immediately to build a more financially inclusive economy, sharing ownership broadly is one of the most important things we can do.
It’s not just about creating wealth. Ownership programs have to be paired with financial literacy, with information sharing, and with driving employee engagement. So, yes, I think financial inclusion and diversity, in some respects, go hand in hand with shared ownership.
Pete, as you have these discussions with private companies regarding scaling up this idea of shared ownership, what is resonating with CEOs? Are they receptive to it? What aspect do they struggle with the most?
I think CEOs know that deep within their organization, employees are less engaged, and they have fewer wealth-building opportunities. I think that immediately resonates.
I think the aspect they struggle with is whether this decision will pay off financially. If they make this investment, are people going to understand equity? Will they value it? Should they just give employees cash in the form of a bonus?
If you can afford to pay people a lot more cash, that is a fantastic option; however, if that is not on the table, then what are the options? Equity gives the opportunity for alignment in a way that cash does not. It aligns interest and it is retentive, which is why we give it to CEOs. In the same way it motivates CEOs to deliver on corporate objectives, it can motivate employees deep within a company and makes them less likely to quit. The challenge is, it requires a lot of effort and time, financial education, sharing information transparently, etcetera.
Through Ownership Works, you have spent a lot of time helping companies champion the ownership movement. When does this get to a tipping point where ownership becomes not the exception, but the norm? Will we see it become the default at some point?
Well, I think to get to a tipping point, we are going to need some help on the policy front. This is something separate that I have been spending some time working on. I think it is unrealistic to think this movement is something we can accomplish just on our own. However, through a combination of policy, storytelling, and other work to show the impact on workers and on companies, this movement has the chance to really take off.
McKinsey has been a great partner in this journey so far, and I really appreciate everything you guys have done to help us get the ball rolling. We have a fantastic team at Ownership Works, and we are continuing to grow. So, if you know smart people who want to change the world on the economic front, in a very tangible way, have them look up Ownership Works. We are still hiring!
To learn more about the ownership movement in corporate America and how Pete and the team at Ownership Works are advancing and championing it, please visit: https://ownershipworks.org/
Asutosh Padhi is a senior partner and the managing partner for McKinsey in North America, leading the firm across the United States, Canada, and Mexico and serving as part of McKinsey’s 15-person global leadership team. He is also a member of McKinsey’s Shareholders Council, the firm’s equivalent to a board of directors.
He is also the coauthor of The Titanium Economy, a new book that explores the industrial tech sector and the bright future that it can help create. It’s available now.
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